The UK’s largest listed hedge fund, Man Group PLC (LON:EMG) expects profits to take a significant hit from the introduction of MiFID II next year.
MiFID II – which, among other things, will change the way investment research is paid for – comes into force in January and Man said its decision to absorb research costs will dent pre-tax profits next year by an estimated US$10-US$15mln.
Strong Q3 results
The news came in its third quarter results statement which showed funds under management surged to US$103.5bn in the three months ended September 30 (June 30: US$95.9bn).
Man had net inflows – fresh investor cash – of US$2.8bn in the quarter, driven by emerging market debt strategies and strong inflows into its “alternative risk premia”.
The company – which manages almost half of its assets through quantitative trading – saw positive investment movement of US$3.3bn in the quarter, while it got a US$0.9bn kicker from the weaker dollar.
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Man’s long-only stock-picking unit increased its net assets by 11% to US$19.7bn, with investors adding US$0.6bn to emerging debt strategies and US$0.5bn to the European equities strategy.
The hedge fund also announced a new share buyback scheme worth up to US$100mln.
Clients keen on new offerings
"The third quarter of 2017 was a period of strong alpha generation for Man, with positive performance across the firm,” said chief executive Luke Ellis.
“As expected the pace of inflows and the level of margin compression both moderated during the quarter.
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“Inflows remained strong overall and were focussed on some of our newer strategies, in particular alternative risk premia.
“We devote significant efforts to developing innovative solutions, and we are pleased to see our clients' enthusiasm for these newer offerings.”
He added: “Looking forward we continue to see a decent level of interest from clients, with our normal caveat that flows are likely to be uneven quarter to quarter."
The strong performance and news of the buyback boosted shares in early deals on Friday, with the stock up 3.4% to 186.1p.